(a) “contract”
means a contract of insurance relating to life insurance;

(b) “replacement
of a contract” or “replacement” means any transaction whereby life insurance is
purchased in a single contract or in 2 or more related contracts by a person
from an insurer and, as a consequence of the transaction, one or more existing
contracts are

(i) rescinded,
lapsed or surrendered,

(ii) changed
to paid‑up insurance or continued as extended term insurance or under
automatic premium loans,

(iii) changed
in any other manner to effect a reduction of benefits,

(iv) changed
so that cash values in excess of 50% of the tabular cash value are released, or

(v) subjected
to the borrowing of any policy loan value, whether in a single loan or under a
schedule of borrowing over a period of time, whereby an amount in excess of 50%
of the tabular cash value is borrowed,

but does not include a
transaction whereby a new purchase is made pursuant to a contractual privilege
being exercised by the policyholder under an existing contract or an existing
contract is replaced by an annuity.

Inducement or recommendation to
replace contract

2 An insurer or insurance agent must not,
where it would be detrimental to the interests of the policyholder,

(a) directly
or indirectly induce or attempt to induce a policyholder to effect a
replacement of a contract, or

(b) recommend
the replacement of a contract.

AR 127/2001 s2;154/2010

Agent or insurer’s duty where
replacement could be detrimental

3 Where
a replacement of a contract is initiated that, in the opinion of an insurer or
an insurance agent, would be detrimental to the policyholder’s interests, the
insurer or insurance agent must advise the policyholder of the advantages and
disadvantages to the policyholder that would result from the replacement.

AR 127/2001 s3;154/2010

Agent’s duty where contract should be changed

4 Where it comes to the knowledge of an
insurance agent that, due to a change in circumstances, an existing contract
should be amended or replaced, the insurance agent must endeavour to have the
existing contract amended or replaced by the insurer that issued it, in a
manner that is consistent with the policyholder’s best interests and in such a
manner that any values, credits or privileges in the existing contract are
transferred to the amended or replacing contract.

Declaration statement on
replacement

5 Where a replacement of a contract is
recommended by an insurance agent or instructed by a policyholder, the
insurance agent must, prior to taking a new application,

(a) present
to and review with the applicant a declaration statement in a form approved by
the superintendent, and

(b) obtain
on the declaration statement the signature of the applicant or other person
whose life will be insured under the replacement contract to indicate receipt
of the declaration statement by the applicant or other person.

AR 127/2001 s5;9/2003;154/2010

Agent’s duty on new contract application

6 An insurance agent

(a) must
obtain as part of an application for a contract a statement signed by the
applicant stating whether replacement of a contract is intended, and

(b) must
prepare and forward to the insurer with the application a statement signed by
the agent stating whether replacement is intended.

AR 127/2001 s6;154/2010

Delivery of contract

7 Where
an insurer has issued a contract and gives the contract to an insurance agent
for delivery to the applicant, the insurance agent must deliver the contract to
the applicant as soon as is practicable unless contrary written instructions
are received from the applicant.

AR 127/2001 s7;154/2010

No insurance agent

8 Where
there is no insurance agent, the insurer that is replacing an insurance contract
must comply with sections 3 to 7 as if that insurer were an insurance agent.

AR 127/2001 s8;154/2010

Right to withdraw application

9 An
applicant for the replacement of a contract may in writing withdraw the
application within 20 days of the date on which the applicant signed the declaration
statement.

AR 127/2001 s9;154/2010

Refund on withdrawal

10 Where
the applicant withdraws an application under section 9, the insurer must refund
any premium, deposit or other payment made by the applicant in respect of the
proposed replacement, and if the application is for a single premium life
insurance contract or a contract whose value depends on a stated rate of
interest or a stated group of assets, the refund must be adjusted to reflect
the change in the capital value of the contract.

AR 127/2010 s10;154/2010

Transitional

11 Any disclosure statement approved by the
Minister under the Replacement of Life Insurance Contracts Regulation
(AR 63/90) is continued as if it were approved by the Minister under this
Regulation.

Repeal

12 The Replacement of Life Insurance
Contracts Regulation (AR 63/90) is repealed.

Expiry

13 For
the purpose of ensuring that this Regulation is reviewed for ongoing relevancy
and necessity, with the option that it may be repassed in its present or an
amended form following a review, this Regulation expires on April 30, 2020.

AR 127/2001 s13;95/2006;39/2016;45/2018

Coming into force

14 This Regulation comes into force on the
coming into force of any section of the Insurance Act (SA 1999 cI‑5.1).